Gerard Scimeca – Chairman, CASE
August 7, 2020
Late last month the Trump administration delivered a blow to American patients and all consumers that have come to rely on the innovation and quality care that has made this country the best place in the world to be treated.
Unfortunately, in a bid to deliver a health care win amidst a coronavirus pandemic that has become increasingly tough to shake, the White House handed down several executive orders that will make life harder, not easier, for patients. To summarize, these mandates will undercut pharmaceutical innovation, threaten the safety of our country’s medical supply chain, and target the hospitals on the frontlines of the ongoing battle against COVID-19.
Thankfully, the administration did make one move that would maximize manufacturer discounts for patients, by requiring Pharmacy Benefit Managers (PBMs) to pass along rebate savings to seniors. This will result in real out-of-pocket savings for Americans.
But the newest order pushes for an international price index (IPI) pricing in Medicare Part B, called “favored nation status.” The name could not be more of a misnomer, either, as “favored nation” implies the lowest price cap among a mix of foreign countries in regard to particular drugs. And the lower the cap, the worse the ripple effects back up the supply chain and for patients in the long run.
In essence, the federal government will take the average price for certain drugs from a combination of foreign countries — all with partly or wholly socialized healthcare systems — and leverage Medicare’s status as the largest purchaser in the market to force companies to sell medicines and other treatments at or below that average threshold. But this is not as simple as it sounds, nor is it beneficial in making life better for patients.
Instead, since price caps in any form ignore natural market forces that determine prices based on supply and demand, manufacturers will no longer be able to recoup investment costs for bringing certain drugs to market and will be forced to either reduce supply or stop manufacturing the drugs altogether. For context, over the course of a decade, potential treatments require nearly $2.6 billion in total investment. Further, fewer than 15% of experimental treatments that enter clinical trials are even able to secure final FDA approval.
So what does this mean for consumers? In short, manufacturers may decide it simply is not feasible to invest billions in potentially breakthrough or lifesaving new ventures, stalling medical progress and needed innovation. For those that continue to manufacture certain drugs, they may have to do so at a lower volume, significantly limiting access for patients. Especially hurt in this scenario are those with rare and chronic conditions, whose new and existing medicines are often far more expensive than others due to niche market conditions.
We have seen price controls tried time and again both abroad and in our current halls of power. Our closest ally, Britain, is experiencing a massive overload in its health system to the tune of nearly 10 million untreated patients by year’s end due to the government’s need to restrict access and control costs with limited supply. At home, Nancy Pelosi’s banner drug bill incorporated the exact same pricing scheme just put forward by the president, but it was shot down at the time by the White House for being just a half-step short of socialism. That makes the president’s order even more confounding.
On the topic of mixed messages, drug importation was also included in the new wave of mandates. Cutting against his administration’s parallel push for “Buy American” mandates — which would attempt to move our entire pharmaceutical supply chain back to the United States precisely due to increased safety and independence — President Trump is instead now opening our borders to foreign drugs under the false assumption that price-savings will follow.
This is misguided on many fronts, the most notable of which is the threat to patient safety. In its current form, the importation executive order applies to Canada, which sources a shocking 85% of its drugs from other countries, including developing nations. Four former FDA commissioners, former FBI Director Louis Freeh, and the National Sherriff’s Association all oppose importation, as it exposes the U.S. supply chain to the very real threat of counterfeit and tainted drugs.
To make matters worse, this proposal has received stiff opposition from Canadian officials, too, who would need to raise their own domestic prices to ensure their government-controlled drug supply was not exhausted in a matter of months, thus offsetting any hope of importation leading to cost savings for American patients. And for some icing on the cake, the FDA does not currently have the capacity to ensure the safety of imported drugs.
To quote Judith Viorst’s famed children’s book, it has certainly been a “terrible, horrible, no good, very bad day” for American patients. It is imperitive that the current administration stand in opposition to damaging socialist proposals like it has done for three years. America needs its innovators, high-quality care, and a safe and reliable medical supply chain now more than ever. Most of today’s mandates accomplish just the opposite.
